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July 22, 2009

PM: Latvia-IMF dissent may nix rescue aid

by Sam Savage

Latvia said its entire $10.7 billion fiscal rescue package may vanish if it doesn't reach a deal with the International Monetary Fund on the next installment.

The IMF, an international organization that oversees the global financial system, has delayed payment of its next $285 million collateralized installment while fund officials visit the troubled Baltic country to hash out tough new conditions for the loan, officials said.

The officials have been in the capital, Riga, for more than a week pressing for further tax increases and budget cuts before releasing the money, Financial Times reported.

Latvia is resisting some of the key demands, including additional pension cuts and value added tax increases, the newspaper said.

Prime Minister Valdis Dombrovskis said further support from European countries, which are providing the bulk of aid, could be at risk if the IMF negotiations failed.